<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Guilford Pharmaceuticals Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(*)
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(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
(*) Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
GUILFORD PHARMACEUTICALS INC.
6611 TRIBUTARY STREET
BALTIMORE, MARYLAND 21224
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Guilford Pharmaceuticals Inc. ("Guilford" or the
"Corporation") will be held on Tuesday, May 19, 1998 at 10:00 a.m. (Eastern
time) at the Corporation's headquarters located at 6611 Tributary Street,
Baltimore, Maryland, for the following purposes:
1. To elect a Board of Directors for the ensuing year;
2. To consider and act upon an amendment to the Corporation's Amended
and Restated Certificate of Incorporation, as amended, increasing the
authorized number of shares of common stock from 40,000,000 to
75,000,000;
3. To ratify the selection of KPMG Peat Marwick LLP as independent
auditors for 1998; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN,
DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
STAMPED ENVELOPE. THIS WILL NOT LIMIT YOUR RIGHT TO ATTEND OR VOTE AT THE ANNUAL
MEETING.
By Order of the Board of Directors
THOMAS C. SEOH
Vice President, General Counsel &
Secretary
Baltimore, Maryland
April , 1998
<PAGE> 3
GUILFORD PHARMACEUTICALS INC.
6611 TRIBUTARY STREET
BALTIMORE, MARYLAND 21224
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1998
GENERAL
This Proxy Statement is being furnished on or about April , 1998, to the
stockholders of Guilford Pharmaceuticals Inc. (the "Corporation" or "Guilford"),
in connection with the solicitation of proxies by the Board of Directors of the
Corporation to be voted at the 1998 Annual Meeting of Stockholders of the
Corporation (the "Annual Meeting"). The Annual Meeting will be held on Tuesday,
May 19, 1998 at 10:00 a.m. (Eastern time) at the Corporation's headquarters
located at 6611 Tributary Street, Baltimore, Maryland.
The cost of soliciting proxies will be borne by the Corporation. The
Corporation may solicit proxies in person, by mail, telephone, telecopier or by
other means by officers and other employees of the Corporation, who will receive
no additional compensation for their services.
The Board of Directors has fixed the close of business on April 1, 1998 as
the record date for the determination of stockholders entitled to vote at the
meeting. At that date, there were shares of common stock of the
Corporation outstanding and entitled to vote at the meeting. Each share will
have one vote.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors currently consists of six members. At the Annual
Meeting, six directors are to be elected. All of the nominees are currently
serving as directors of the Corporation. Unless otherwise instructed on the
proxy, it is the intention of the persons named in the proxy to vote the shares
represented by each properly executed proxy for the election as directors of the
persons named below as nominees. The Board of Directors believes that all
nominees will stand for election and will serve if elected. However, if any of
the persons nominated by the Board of Directors fails to stand for election or
is unable to accept election, proxies will be voted by the proxy holders for the
election of such other bona fide nominee person or persons as the Board of
Directors may designate. Directors will be elected by a plurality vote.
<PAGE> 4
INFORMATION AS TO NOMINEES
The following table presents information concerning persons nominated for
election as directors of the Corporation, including their current membership on
committees of the Board of Directors, principal occupations or affiliations
during the last five years and certain other directorships held.
<TABLE>
<S> <C>
Craig R. Smith, M.D.................... Chairman of the Board of Directors, President and Chief
Age 52 Executive Officer.
Dr. Smith joined the Corporation as a Director at the
Corporation's inception in July 1993. Dr. Smith was
elected President and Chief Executive Officer in August
1993 and was elected Chairman of the Board in January
1994. Prior to joining the Corporation, Dr. Smith was
Senior Vice President for Business and Market
Development at Centocor, Inc., a biotechnology company.
Dr. Smith joined Centocor in 1988 as Vice President of
Clinical Research after serving on the Faculty of the
Department of Medicine at Johns Hopkins Medical School
for 13 years. Dr. Smith received his M.D. from the State
University of New York at Buffalo in 1972 and received
training in Internal Medicine at Johns Hopkins Hospital
from 1972 to 1975.
Richard L. Casey....................... Director and Chairman of the Audit Committee.
Age 51
Mr. Casey has been a Director of the Corporation since
its inception in July 1993 and served as Chairman of the
Board from inception through December 1993. Mr. Casey is
Chairman of the Board and Chief Executive Officer of
Scios Inc. ("Scios"), a biopharmaceutical company. He
joined Scios in December 1987 as President and Chief
Executive Officer and has served as a director since
that time. Mr. Casey was elected Chairman of the Board
of Scios in November 1992. Mr. Casey has over 20 years
experience in the pharmaceutical industry and has served
in various positions with ALZA Corporation, Syntex
Medical Diagnostics and Eli Lilly and Company ("Eli
Lilly"). Mr. Casey serves on the boards of directors of
Karo Bio AB, a Swedish biotechnology corporation
affiliated with Scios, and VIVUS Inc., a medical devices
corporation located in Menlo Park, California.
Solomon H. Snyder, M.D................. Director, member of the Audit Committee, and Chairman of
Age 59 the Scientific Advisory Board.
Dr. Snyder has been a Director of the Corporation and
Chairman of the Corporation's Scientific Advisory Board
("SAB") since the Corporation's inception in July 1993.
Dr. Snyder received his M.D. in 1962 from Georgetown
Medical School, trained as a Research Associate with
Julius Axelrod at the National Institute of Mental
Health and completed his Psychiatry Residency at Johns
Hopkins Hospital. He is presently Director of the
Department of Neuroscience at Johns Hopkins Medical
School and Distinguished Service Professor of
Neuroscience, Pharmacology and Molecular Sciences, and
Psychiatry. Dr. Snyder has received a number of awards
including the Albert Lasker Award in Basic Biomedical
Research, the Wolf Prize and the Bower Award. He is a
member of the U.S. National Academy of Sciences, the
Institute of Medicine and the American Academy of Arts
and Sciences. Dr. Snyder is a director of Scios.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
W. Leigh Thompson, M.D., Ph.D.......... Director and member of the Compensation Committee.
Age 59
Dr. Thompson has been a Director of the Corporation
since April 1995. Dr. Thompson joined Eli Lilly in 1982
and was appointed Executive Vice President for Research
in 1991 and Chief Scientific Officer in 1993. Dr.
Thompson retired from Eli Lilly in December 1994 and is
President and Chief Executive Officer of Profound
Quality Resources, Ltd., an independent consulting firm
advising clients in the pharmaceutical industry. Dr.
Thompson is a director of Chrysalis Corporation, Corvas
International, Inc., Ergo Science Corp., La Jolla
Pharmaceutical Co., GeneMedicine, Inc., Orphan Medical,
Inc., and Depomed, Inc.
Elizabeth M. Greetham.................. Director and member of the Compensation Committee.
Age 48
Ms. Greetham has been a Director of the Corporation
since November 1995. Since 1992, Ms. Greetham has been
portfolio manager of WPG Life Sciences Fund, L.P. and
WPG Institutional Life Sciences Fund, L.P., and since
1990 she has been involved in health care investments
for institutional, growth and individual high net worth
accounts at Weiss, Peck & Greer, L.L.C. She is President
of Libracorn Financial Consultants and a member of the
boards of directors of Medco Research, Inc., Chenex
Pharmaceuticals, Inc., Progenics Pharmaceuticals,
Pathogenesis Corp., Sangstat Medical Corp., Chirex Inc.,
and Repligen Corporation.
George L. Bunting, Jr.................. Director and Chairman of the Compensation Committee.
Age 57
Mr. Bunting has been a Director of the Corporation since
May 1996. Mr. Bunting is President and Chief Executive
Officer of Bunting Management Group, a position he has
held since July 1991. He formerly served as Chairman of
the Board and Chief Executive Officer of the Noxell
Corporation (a Procter & Gamble Company as of November
1989). Mr. Bunting joined Noxell Corporation in 1966 as
a Product Manager. In 1968, he was elected to the Board
of Directors of Noxell Corporation. In March 1970, he
was elected to the position of Executive Vice President
and served as President and Chief Executive Officer from
November 1973 until April 1986 when he became Chairman
and Chief Executive Officer. Mr. Bunting is a director
of Crown Central Petroleum Corporation, Mercantile
Bankshares Corporation, and USF&G Corporation. He is
currently Chairman of Johns Hopkins Medicine, Health
Systems, and Hospital, as well as a Trustee of The Johns
Hopkins University.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR
DIRECTOR LISTED ABOVE.
BOARD COMMITTEES
The Board of Directors has a Compensation Committee and an Audit Committee.
The Compensation Committee of the Corporation's Board of Directors oversees the
compensation practices of the Corporation, and its responsibilities include
determining compensation policies and practices, changes in compensation and
benefits for management, determining employee benefits and all other matters
relating to compensation of employees. The Compensation Committee also
administers the Corporation's employee stock option and restricted share plans,
including the 1993 Employee Share Option and Restricted Share Plan, as amended
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<PAGE> 6
(the "1993 Employee Plan"). This Committee met five times during 1997. The Audit
Committee reviews and approves the internal accounting procedures of the
Corporation, recommends and consults with the Corporation's independent
accountants and reviews and approves the services provided by and fees charged
by such accountants. This Committee met two times during 1997.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During 1997, the Board of Directors of the Corporation held nine meetings.
All Directors of the Corporation attended 75% or more of all meetings of the
Board and committees of the Board of which they were members.
DIRECTORS' COMPENSATION
Prior to 1997, Directors received no compensation for their attendance at
Board meetings but received reimbursement for expenses related to their
attendance at meetings. In February 1997, the Compensation Committee of the
Board adopted a policy, effective as of the date of the Corporation's 1997
annual meeting of stockholders (i.e., May 21, 1997), to pay non-employee
directors an annual retainer of $10,000, payable quarterly in advance, plus
$1,500 for each regular meeting of the Board attended either in person or by
telephone and $1,500 for each special meeting of the Board attended in person.
In 1994, the Corporation initiated a Directors' Stock Option Plan, as
amended (the "Director Plan"), to attract outside directors with an increased
incentive to make significant contributions to the long-term performance and
growth of the Corporation and to directly align their interests with those of
the Corporation's stockholders. Board members who are not officers or employees
of (i) the Corporation, (ii) any subsidiary of the Corporation, or (iii) any
entity which owns twenty percent or more of the capital stock of the Corporation
are eligible to receive options under the Director Plan.
The Corporation has reserved 300,000 shares of the Corporation's common
stock for issuance under the Director Plan and 97,500 options to purchase shares
have been granted to date. Options issued under the Director Plan are
non-qualified stock options for tax purposes. The exercise price of options
granted under the Director Plan are not less than the closing price of a share
of common stock on the date immediately prior to the date the option is granted.
Options vest as to 50% of the shares covered on the first anniversary of the
date of grant with the remainder vesting on the second anniversary date and
remain exercisable for a period of ten years from the date the option is
granted. Each eligible director who begins serving on the Board of Directors
receives an option to purchase 30,000 shares of common stock on the date such
service commences and also is entitled to an option to purchase 7,500 shares of
common stock immediately following each of the next four annual elections of
directors, provided such Director has served for at least one year and continues
to be a director at the time of such issuance. Effective February, 1997, the
Director Plan, and all option agreements under that plan, were amended to allow
for certain transfers among immediate family members of options granted under
that plan. Specifically, the Director Plan provides that a director may transfer
options granted under that plan to (i) his or her spouse, children or
grandchildren ("Immediate Family Members"), (ii) a trust or trusts for the
exclusive benefit of such Immediate Family Members, or (iii) a partnership in
which such Immediate Family Members are the only partners, provided that there
may be no consideration for any such transfer and subsequent transfers of the
option are prohibited except those in accordance with the preceding provisions
or by will or the laws of descent and distribution. Mr. Casey does not
participate in the Director Plan.
Dr. Snyder, a Director of the Corporation, has provided consulting services
to the Corporation under consulting agreements since August 1993. Under the
terms thereof, Dr. Snyder receives no other compensation outside those provided
therein (other than reimbursement of expenses), and thus does not participate in
the Director Plan. For a description of the Corporation's current consulting
arrangement with Dr. Snyder, see "Compensation Committee Interlocks and Insider
Participation" below.
4
<PAGE> 7
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Corporation's officers,
directors and certain beneficial holders of common stock to file reports about
their ownership of the Corporation's common stock. Based solely on its review of
the copies of such reports furnished to the Corporation by its directors and
officers during and with respect to the year 1997, the Corporation believes that
all reports required by Section 16(a) of the Exchange Act were timely filed.
5
<PAGE> 8
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of common stock as of April 1, 1998, of each person known by the
Corporation to be the beneficial owner of more than five percent of the
outstanding common stock, the Corporation's Chief Executive Officer and the four
other most highly compensated executive officers of the Corporation for the
fiscal year ended December 31, 1997, each of the Directors of the Corporation,
and all officers and Directors of the Corporation as a group. At April 1, 1998,
the Corporation had outstanding approximately shares of common stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
------------------- ----------------------- ----------------
<S> <C> <C>
Chancellor LGT Asset Management, Inc. .................... 1,810,450
("CLGTAM, Inc."), Chancellor LGT Trust
Company ("CLGTTC"), and LGT Asset
Management, Inc. ("LGT") (2)
CLGTAM, Inc. and CLGTTC
1166 Avenue of the Americas
New York, NY 10036
LGT
50 California Street
San Francisco, CA 94111
Scios Inc. ............................................... 1,437,500
2450 Bayshore Parkway
Mountain View, CA 94043
Amgen Inc. (3)............................................ 1,340,095
1840 DeHavilland Drive
Thousand Oaks, CA 91320
The Capital Group Companies, Inc. and Capital Research and
Management Company (4).................................. 1,100,000
333 South Hope Street
Los Angeles, CA 90071
Craig R. Smith, M.D. (5).................................. 435,880
John P. Brennan (6)....................................... 117,340
Andrew R. Jordan (7)...................................... 194,744
David R. Savello, Ph.D. (8)............................... 11,317
Thomas C. Seoh (9)........................................ 47,922
George L. Bunting, Jr. (10)............................... 785,400
Richard L. Casey (11)..................................... 1,512,500
c/o Scios Inc.
2450 Bayshore Parkway
Mountain View, CA 94043
Elizabeth M. Greetham (12)................................ 206,700
Solomon H. Snyder, M.D. (13).............................. 635,217
W. Leigh Thompson, M.D., Ph.D. (14)....................... -- --
All directors and officers as a group (13 persons)........ 4,046,019
</TABLE>
- ---------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of the Corporation's
common stock subject to options or warrants currently exercisable or
exercisable within 60 days of April 1, 1998 are deemed outstanding for
purposes of computing the percentage ownership of the person holding such
option or warrant but are not deemed outstanding for purposes of computing
the percentage ownership of any other person. Except where indicated
otherwise, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment
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<PAGE> 9
power with respect to all shares of the Corporation's common stock shown as
beneficially owned by them.
(2) Based solely on information contained in a Schedule 13G, dated February 6,
1998, as of December 31, 1997, these shares were beneficially owned by
CLGTAM, Inc., its wholly-owned subsidiary, CLGTTC and LGT, the parent
company of CLGTAM, Inc. LGT is an indirect wholly-owned subsidiary of
Liechtenstein Global Trust, A.G., which itself is controlled by the Prince
of Liechtenstein Foundation. According the Schedule 13G, CLGTAM and CLGTTC
beneficially own the shares as investment advisors for various fiduciary
accounts and have sole power to vote and dispose of all the shares held by
them.
(3) Includes currently exercisable warrants to acquire 700,000 shares of common
stock.
(4) Based solely on information contained in a Schedule 13G, dated February 10,
1998, as of December 31, 1997, these shares were beneficially held by
Capital Research and Management Company, an investment adviser registered
under Section 203 of the Investment Advisors Act of 1940 and a wholly-
owned subsidiary of The Capital Croup Companies, Inc. ("CCCI"), a parent
holding company of a group of investment management companies. According to
the Schedule 13G, CCCI does not have investment power or voting power over
any of the securities reported herein but may also be deemed to
"beneficially own" them under Rule 13d-3 of the Securities Exchange Act of
1934.
(5) Includes options to acquire 46,284 shares of common stock exercisable
within 60 days of April 1, 1998, and 9,175 shares of common stock held by
Dr. Smith's spouse, an employee of the Corporation. Also includes 190 and
256 shares of common stock, respectively, held in 401(k) plan accounts for
the benefit of Dr. Smith and his spouse. Dr. Smith disclaims beneficial
ownership the securities held by his spouse. Dr. Smith also entered into a
"zero-cost collar" transaction in 1997 pursuant to which he wrote a covered
call option and purchased a put option, each for 100,000 shares of the
Corporation's common stock. Only one of these options can be in the money
on the expiration date on October 30, 2000, at which time the in-the-money
option will be exercised (and settled for cash), and the other option will
expire. If neither option is in the money on the expiration date, both
options will expire.
(6) Includes options to acquire 51,842 shares of common stock exercisable
within 60 days of April 1, 1998 and 190 shares of common stock held in a
401(k) plan account for the benefit of Mr. Brennan.
(7) Includes 150 shares owned by a child sharing Mr. Jordan's household and
32,609 shares held by Mr. Jordan's spouse, as to all of which shares Mr.
Jordan disclaims beneficial ownership, and options to acquire 67,691 shares
of common stock exercisable within 60 days of April 1, 1998. Also includes
an aggregate of 32,799 shares of common stock held in a 401(k) plan account
for the benefit of Mr. Jordan.
(8) Includes 317 shares of common stock held in a 401(k) plan account for the
benefit of Dr. Savello.
(9) Includes options to acquire 28,127 shares of common stock exercisable
within 60 days of April 1, 1998 and 295 shares of common stock held in a
401(k) plan account for the benefit of Mr. Seoh.
(10) Includes options to acquire 33,750 shares of common stock exercisable
within 60 days of April 1, 1998. Includes 750,000 shares of common stock
held by The Abell Foundation, Inc. ("Abell"), as to which Mr. Bunting
serves as a trustee and member of the Finance Committee. Mr. Bunting
disclaims beneficial ownership of the shares owned by Abell. Does not
include 3,500 shares of common stock held by a limited liability company
(the "LLC"), as to which shares Mr. Bunting does not exercise voting or
investment control and disclaims beneficial ownership except as to his
limited 1% pecuniary interest in the LLC.
(11) Includes options to acquire 75,000 shares exercisable within 60 days of
April 1, 1998. Mr. Casey is an executive officer and Chairman of the Board
of Directors of Scios. He may be deemed to have voting and investment power
over the shares held by Scios. Mr. Casey disclaims beneficial ownership of
these shares.
(12) Represents shares held by WPG Life Sciences Fund, L.P. (the "Fund") and WPG
Institutional Life Sciences Fund, L.P. (the "Institutional Fund"). Ms.
Greetham serves as Portfolio Manager of both the Fund and the Institutional
Fund. Ms. Greetham is a controlling person of Libracorn Financial
Consultants ("Libracorn"), a limited partner of the Fund which, through its
interest in the Fund, has a
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<PAGE> 10
1.55% interest in the shares held by the Fund. Ms. Greetham disclaims
beneficial ownership of the shares held by the Fund and the Institutional
Fund except to the extent of her beneficial interest through Libracorn.
Also includes options to acquire 33,750 shares of common stock exercisable
within 60 days of April 1, 1998.
(13) Includes options to acquire 60,000 shares of common stock exercisable
within 60 days of April 1, 1998. Does not include 1,437,500 shares owned by
Scios. Dr. Snyder is a member of the Board of Directors of Scios and may be
deemed to have shared voting and investment power over these shares. Dr.
Snyder disclaims beneficial ownership of the shares owned by Scios. Dr.
Snyder entered into a "zero-cost collar" transaction in 1997 pursuant to
which he wrote a covered call option and purchased a put option, each for
93,478 shares of the Corporation's common stock. Only one of these options
can be in the money on the expiration date on October 30, 2000, at which
time the in-the-money option will be exercised (and settled for cash), and
the other option will expire. If neither option is in the money on the
expiration date, both options will expire.
(14) Excludes options to acquire an aggregate of 45,000 shares of common stock
issued under the Director Plan, which options Dr. Thompson has transferred,
by gift, to an adult child not sharing Dr. Thompson's household and as to
which securities Dr. Thompson disclaims beneficial ownership.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for
services in all capacities awarded to, earned by or paid to the Corporation's
Chief Executive Officer and the Corporation's four other most highly compensated
executive officers (the "Named Executive Officers") whose total annual salary
and bonus exceeded $100,000 during the fiscal year ended December 31, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ----------------------------
--------------------------------------------- RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($)(1) OPTIONS(#)(2) COMPENSATION($)
------------------ ---- --------- -------- --------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Craig R. Smith, M.D.......... 1997 $300,000 $150,000 $ -- $ -- 80,000 $3,824(8)
Chairman, President and 1996 260,417 150,000 61,890(3) -- 100,000 --
Chief Executive Officer 1995 248,334 75,000 -- -- 150,000 --
John P. Brennan.............. 1997 191,000 50,000 -- -- 30,000 3,824(8)
Senior Vice President, 1996 169,223 45,000 -- -- 40,000 --
Operations 1995 160,000 37,000 31,421(5) 13,111(7) 82,500 --
Andrew R. Jordan............. 1997 191,000 60,000 -- -- 40,000 3,824(8)
Senior Vice President, 1996 170,981 40,000 -- -- 40,000 --
Chief Financial Officer 1995 164,583 35,000 -- -- 71,250 --
and Treasurer
David R. Savello, Ph.D. ..... 1997 180,000(4) 52,000 179,549(5) 211,250(7) 115,000 3,824(8)
Senior Vice President,
Development
Thomas C. Seoh............... 1997 178,000 65,000 281,250(6) -- 40,000 3,824(8)
Vice President, 1996 165,317 38,000 75,147(6) -- 30,000 --
General Counsel and 1995 120,000(4) 35,333 28,760(5) 51,255(7) 60,000 --
Secretary
</TABLE>
- ---------------
(1) All of the restricted shares awards shown above granted to Messrs Seoh and
Brennan became fully vested in 1997 and 1995, respectively. The restricted
shares granted to Dr. Savello vest rate of 25% per year beginning on April
1, 1998, the first anniversary of his date of employment with the
Corporation.
(2) The option grants reported for 1995 and 1997 include options awarded in
February, 1996 and 1998, respectively, for performance related to fiscal
years 1995 and 1997, respectively.
(3) Consists of forgiveness of debt related to Dr. Smith's purchase of shares of
common stock of the Corporation in 1993 and amounts paid to cover
anticipated tax liabilities related to a portion of the debt
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<PAGE> 11
forgiven in the aggregate amount of $10,787 as well as $51,103 paid to
cover costs incurred in connection with Dr. Smith's relocation to
Baltimore.
(4) Mr. Seoh and Dr. Savello joined the Corporation in April 1995 and 1997,
respectively.
(5) Consists of relocation costs paid by the Corporation.
(6) Consists of the dollar value of non-cash compensation related to the vesting
in 1996 and 1997 of the restricted share awards granted to Mr. Seoh upon
employment with the Corporation.
(7) The value of the restricted share awards of Messrs. Brennan and Seoh and Dr.
Savello shown above were $75,388, $301,875 and $201,250, respectively at
December 31, 1997 based on the closing price of the common stock of $20.125
per share on that date.
(8) Represents the value at December 31, 1997 of shares of the Corporation's
common stock issued to the 401(k) Plan account of each of the Named
Executive Officers as part of the Corporation's program of matching employee
contributions, based on the closing price of the common stock of $20.125 per
share. These contributions vest over a four year period in the participant's
account based on the participant's term of service with the Corporation.
OPTION GRANTS
The following table sets forth certain information concerning the grant of
stock options under the 1993 Employee Plan to the Named Executive Officers for
the fiscal year ended December 31, 1997:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------------------------------- ANNUAL RATES
PERCENTAGE OF OF STOCK PRICE
TOTAL OPTIONS APPRECIATION FOR
NUMBER OF GRANTED TO OPTION TERM(3)
SECURITIES UNDERLYING EMPLOYEES IN EXERCISE OR EXPIRATION -----------------------
NAME AND POSITION OPTIONS GRANTED(#)(1) FISCAL YEAR(%) BASE PRICE($)(2) DATE 5%($) 10%($)
----------------- --------------------- -------------- ---------------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Craig R. Smith, M.D.. 80,000 8.2% $19.75 2/08 $ 993,654 $2,518,113
John P. Brennan...... 30,000 3.1 19.75 2/08 372,620 944,292
Andrew R. Jordan..... 40,000 4.1 19.75 2/08 496,827 1,259,057
David R. Savello..... 15,000 1.6 19.75 2/08 186,310 472,146
100,000(4) 10.3 20.75 4/07 1,304,956 3,307,016
Thomas C. Seoh....... 40,000 4.1 19.75 2/08 496,827 1,259,057
</TABLE>
- ---------------
(1) Represents options granted in February 1998 to the Named Executive Officers
in respect of fiscal year 1997. In addition, effective February, 1997, the
1993 Employee Plan and all option agreements under that plan, including the
grants set forth above, were amended to allow for certain transfers among
immediate family members of options granted under that plan. Specifically,
the 1993 Employee Plan provides that an optionee may transfer options
granted under that plan to (i) his or her Immediate Family Members, (ii) a
trust or trusts for the exclusive benefit of such Immediate Family Members,
or (iii) a partnership in which such Immediate Family Members are the only
partners, provided that there may be no consideration for any such transfer
and subsequent transfers of the option are prohibited except those in
accordance with the preceding provisions or by will or the laws of descent
and distribution.
(2) The exercise prices are equal to the fair market value of the common stock
on the date of grant.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the ten year option term. The assumed 5%
and 10% rates of stock appreciation are mandated by the rules of the
Securities and Exchange Commission and may not accurately reflect the
appreciation of the price of the common stock from the date of grant until
the end of the option term. These assumptions are not intended to forecast
future price appreciation of the common stock.
(4) Includes options to acquire 25,000 shares of the Corporation's common stock,
exercisable for six months following termination of Dr. Savello's employment
with the Corporation, provided that Dr. Savello has been continuously
employed for four years prior to such termination.
9
<PAGE> 12
OPTION EXERCISES AND HOLDINGS
Options with respect to 262,925 shares were exercised during the fiscal
year ended December 31, 1997. The following table sets forth information with
respect to the Named Executive Officers concerning the exercise of options
during the fiscal year ended December 31, 1997 and unexercised options held as
of the end of that fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END(#)(1) AT FISCAL YEAR END($)(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Craig R. Smith, M.D. ..... 56,250 $1,116,605 25,000 248,750 $ 62,500 $1,033,903
John P. Brennan........... 13,566 327,952 36,217 122,283 292,507 705,630
Andrew R. Jordan.......... 5,000 88,042 49,878 115,938 570,055 460,509
David R. Savello, Ph.D. .. -- -- -- 115,000 -- 5,625
Thomas C. Seoh............ 10,000 235,833 21,877 98,123 194,255 472,415
</TABLE>
- ---------------
(1) Includes options granted in February, 1998 relating to performance in 1997.
(2) Total value of unexercised in-the-money options is based on the closing
price of the common stock of $20.125 per share on December 31, 1997 minus
the exercise price of the options.
EMPLOYMENT AGREEMENTS
Prior to 1997, the Corporation entered into employment agreements with Dr.
Smith, Mr. Jordan, Mr. Brennan, and Mr. Seoh shortly before each of these
individuals joined the Corporation. Under the original terms of these
agreements, in the event one or more of these individuals were required to leave
the Corporation's employment at the Corporation's request, other than for cause,
the Corporation would be required to continue paying a salary to such
individual(s) until the earlier of commencement of other suitable employment or
three months (six months in the case of Mr. Seoh), if terminated within the
first twelve months of employment, or six months (nine months in the case of Mr.
Seoh), if terminated thereafter. In 1996, these agreements were amended to
provide for such severance payments for 12 months following termination of
employment except in the case of Dr. Smith where the severance payment period
was set at 36 months following employment termination. Prior to his joining the
Corporation in April, 1997, the Corporation entered into an employment agreement
with Dr. Savello providing for similar severance payments for six months in the
event employment with the Corporation is terminated within the first 12 months
of employment, for 12 months if employment termination occurs thereafter, and
for 24 months in the event of a change of control of the Corporation and Dr.
Savello is not offered a similar or better management position.
401(k) PROFIT SHARING PLAN
The Corporation adopted a defined contribution plan (the "401(k) Plan")
effective January 1, 1994 which is intended to satisfy the tax qualification
requirements of Sections 401(a), 401(k) and 401(m) of the Internal Revenue Code
of 1986, as amended (the "Code"). All employees of the Corporation, including
the Named Executive Officers, hired on or before the effective date of the
401(k) Plan are eligible to participate as of January 1, 1994. Employees,
including the Named Executive Officers, hired after January 1, 1994 are eligible
to participate as of the first day of the calendar quarter following completion
of three months of service and attainment of age 21. The 401(k) Plan permits
participants to contribute up to 15% of compensation, excluding fringe benefits,
not to exceed the limits of Section 402g(1) of the Code (i.e., $10,000 in 1998).
All amounts deferred under the 401(k) Plan's salary reduction feature by a
participant vest immediately in the participant's account while contributions
made by the Corporation vest over a four year period in the participant's
account based on the participant's term of service with the Corporation.
Effective January 1,
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<PAGE> 13
1997, the Corporation began making "matching contributions" in newly issued
shares of its common stock equal in value to fifty percent (50%) of the first
six percent (6%) of an employee's salary contributed to such employee's 401(k)
Plan account. In addition, discretionary payments of approximately $9,000 and
$11,000 were made in 1995 and 1996, respectively. No such amounts were paid in
1997.
EMPLOYEE SHARE OPTION AND RESTRICTED SHARE PLANS
All full-time employees of the Corporation or any subsidiary, including the
Named Executive Officers, or other individuals whose participation the Board of
Directors determines is in the best interests of the Corporation, are eligible
to receive options or restricted shares of the Corporation's common stock under
the Corporation's employee share option and restricted shares plans.
KEY PERSON LIFE INSURANCE
The Corporation is the owner and beneficiary of term life insurance
policies in the amount of $1,000,000 covering Drs. Smith and Snyder and Messrs.
Jordan and Brennan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Currently, the Compensation Committee of the Board of Directors is
comprised of Mr. Bunting, Ms. Greetham and Dr. Thompson. During 1997 until May
21, 1997, Dr. Snyder served as Chairman of the Compensation Committee. Effective
May 21, 1997, Dr. Snyder was appointed to the Audit Committee and Mr. Bunting
joined the Compensation Committee as Chairman of that committee. Ms. Greetham
and Dr. Thomson served as members of the Compensation Committee for all of
fiscal 1997.
In September 1995, the Corporation entered into a consulting agreement with
Dr. Snyder (the "Consulting Agreement"), pursuant to which Dr. Snyder provides
certain consulting services to the Corporation, including, but not limited to,
serving as Chairman of the SAB, recommending candidates for SAB membership,
assisting the Corporation in the recruitment of scientific staff, advising the
Corporation with respect to the purchase of laboratory equipment and acquisition
of new technologies and participating in such business meetings as the President
of the Corporation may reasonably request. Dr. Snyder has agreed to make himself
available to render such services for a minimum of 24 and a maximum of 38 days
per year. As consideration for these services, the Corporation pays or has
agreed to pay Dr. Snyder annual fees during each of the 12 month periods
beginning on September 1, 1995, 1996 and 1997 of $150,000, $160,000 and
$170,000, respectively, payable in equal monthly installments. Dr. Snyder
received non-qualified stock options to purchase 90,000 shares of common stock
at an exercise price of $5.917 per share which vest at a rate of one-third each
year beginning on the first anniversary of the date of the Consulting Agreement.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
GELL PHARMACEUTICALS INC.
In February 1995, the Corporation and Abell formed Gell Pharmaceuticals,
Inc. ("Gell"), a new company dedicated to the development of compounds to treat
cocaine and other addictions. Abell purchased an 80% interest in Gell for $2.5
million, and the Corporation owned the remaining 20%. In March, 1997, Abell
exercised its rights to exchange its interest in Gell for 750,000 shares of the
Corporation's common stock and Gell became a wholly-owned subsidiary of the
Corporation. Prior to the exchange, the Corporation conducted all of Gell's
research and development under a services agreement.
CERTAIN TRANSACTIONS WITH DR. SNYDER
For a description of certain transactions with Dr. Snyder, see
"Compensation Committee Interlocks and Insider Participation" above.
11
<PAGE> 14
CERTAIN TRANSACTIONS WITH SCIOS INC.
The Corporation paid an aggregate of approximately $341,000, $295,000 and
$233,000 for services, equipment purchases and lease payments to Scios in fiscal
1997, 1996 and 1995, respectively.
EMPLOYMENT OF CERTAIN SPOUSES OF EXECUTIVE OFFICERS
The spouse of Dr. Smith is an employee of the Corporation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") has
furnished the following report on its policies with respect to the compensation
of executive officers. This report and the performance graph that follows it are
not deemed to be "soliciting materials" or to be "filed" with the Securities and
Exchange Commission (the "SEC") or subject to the SEC's proxy rules or to the
liabilities of Section 18 of the Exchange Act, and the report and the
performance graph shall not be deemed to be incorporated by reference into any
prior or subsequent filing by the Corporation under the Securities Act of 1933,
as amended, or the Exchange Act.
The Committee is currently comprised of Mr. Bunting, Dr. Thompson and Ms.
Greetham, none of whom is an officer or employee of the Corporation. The
Committee is responsible for overseeing the Corporation's compensation programs
for all employees, including executives. For executive officers, the Committee
evaluates performance and determines compensation policies and levels.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with
business objectives and performance, and to enable the Corporation to attract,
retain and motivate executive officers and other employees who contribute to the
longterm success of the Corporation and to motivate them to enhance long-term
stockholder value. Key elements of this philosophy are:
- The Committee establishes base salaries competitive with those of
biopharmaceutical companies with which the Corporation competes for
talent. To ensure that such salaries are competitive, the Committee
regularly compares the Corporation's salary practices with such companies
and sets its salary parameters based on this review.
- The Corporation maintains annual incentive opportunities in order to
provide motivation to achieve specific short term operating goals.
- The Corporation provides significant equity-based incentives for
executives and other employees to ensure that they are motivated over the
long-term to respond to the Corporation's business challenges and
opportunities as owners and not just as employees.
The Committee in general seeks to set the components of compensation and
the total compensation (i.e., base salary, annual incentives and long-term
equity-based incentives) to be competitive with the market when compared to a
group of biopharmaceutical companies deemed comparable to the Corporation in
terms of size, stage of development, potential, target peer group and other
factors, and which compete in the job market for individuals with skills desired
by the Corporation (the "Comparison Group"). The companies chosen for the
Comparison Group used for compensation purposes include several of the companies
which comprise the published industry indices in the Performance Graph included
in this proxy statement. Because the Committee believes that the Corporation's
most direct competitors for executive and other talent are not necessarily all
of the companies in the broad industry index, many smaller or earlier stage
companies included in the index are not included in the Comparison Group.
BASE SALARY. The Committee annually reviews each executive officer's base
salary, including those of the Named Executive Officers, against the base
salaries paid for similar positions by companies within the Comparison Group. A
range of salary levels is established by this comparison for comparable
positions. Within
12
<PAGE> 15
this range, the Committee subjectively considers individual factors, including
individual performance, level of responsibility, prior experience, breadth of
knowledge and competitive pay practices, as well as the extent to which the
Corporation achieved its corporate objectives and other significant
accomplishments during the period under review. From year to year, the relative
weighting of the individual components and the corporate performance component
may differ from officer to officer, and can be expected to change over time in
response to the Corporation's stage of development and the evolution of the
industry. Based on a review of the foregoing factors, the Committee approved a
pool in the aggregate amount of $63,666, or a 4.93% aggregate increase over 1997
levels, to be available for base salary increases of executive officers
(excluding the Chief Executive Officer), and $576,603, or a 5.79% aggregate
increase over 1997 levels, to be available for all employees (excluding the
Chief Executive Officer).
ANNUAL INCENTIVE. In addition to base salary, the Corporation offers
discretionary cash bonuses to employees, including executive officers, as annual
incentives to achieve short-term operating objectives. The actual incentive
award earned depends on the extent to which corporate and individual performance
objectives were achieved. The Committee and the full Board of Directors review
and approve the annual performance objectives for the Corporation before the
start of each year, and review the quarterly performance objectives of
individual officers. The Corporation's objectives consist of operating,
strategic and financial goals that are considered to be critical to the
Corporation's fundamental long-term goal of building stockholder value.
After the end of the year, the Committee evaluates the degree to which the
Corporation has met its goals and, at the sole discretion of the Committee,
establishes a total pool available for annual incentive awards. Individual
awards are determined based on the Corporation's overall performance and by
evaluating each participant's performance against objectives and allocating a
portion of the award pool based on the participant's contributions during the
year. Awards are paid in cash and distributions are made in the first quarter
following the performance year.
For fiscal 1997, the Committee determined that the Corporation
substantially achieved or exceeded a majority the year's corporate goals, and
achieved other significant accomplishments. Among the Corporation's achievements
for fiscal 1997 are the following. In February, 1997, the Corporation's first
product, GLIADEL(R) Wafer ("GLIADEL"), was commercially launched in the United
States by the Corporation's worldwide (except for Scandinavia) marketing
partner, Rhone-Poulenc Rorer Pharmaceuticals Inc. ("RPR"), resulting in
aggregate GLIADEL related revenues for fiscal 1997 in excess of $7.3 million. In
addition, in August, 1997, the Corporation entered into a major corporate
collaboration with Amgen Inc. respecting the research, development and
commercialization of the Corporation's FKBP-based neuroimmunophilin ligand
technology. In connection with this collaboration, the Corporation received
during 1997 an aggregate of over $36 million in rights, equity and research and
development payments. The Corporation also unveiled two significant research
programs, NAALADase inhibition and PARP inhibition for neuroprotection, and
developed a new polymer oncology product candidate based on the Corporation's
novel polyphosphoester polymer technology for pre-clinical testing. The
Corporation achieved these accomplishments while limiting its net loss for
fiscal 1997 to under $11.5 million (and less than $7.5 million net of non-cash
charges). Finally, as a result of the Corporation's April 1997 follow-on public
offering of 3.25 million shares of its common stock and October, 1997 private
placement of shares and stock purchase warrants to Amgen , the Corporation
raised over $90 million in additional equity capital, which together with
revenues from RPR and Amgen resulted in the strongest balance sheet in the
Corporation's history, with $160 million in cash, cash equivalents and
investments at December 31, 1997.
Based on the Corporation's performance, the Committee determined that the
total incentive pool for executive officers (excluding the Chief Executive
Officer) would be $347,000, or 26.9% of 1997 base salaries, and $1,119,013, or
11.2% of 1997 base salaries, for all eligible employees (excluding the Chief
Executive Officer) under the annual incentive plan.
LONG-TERM INCENTIVES. The Corporation's long-term incentive program is
effected through the its stock option and restricted share plans. The program
utilizes vesting periods (generally four years) to encourage executives and
other full-time salaried employees to continue in the employ of the Corporation.
Through option grants and restricted share awards, executives receive
significant equity incentives to build long-term
13
<PAGE> 16
stockholder value. Grants are made at the fair market value of the Corporation's
common stock on the trading date immediately preceding the grant. Recipients
realize value from these grants only if the Corporation's common stock
appreciates over the term of the option. The size of option grants is determined
based on competitive practices at companies in the comparison group, the
Corporation's philosophy of significantly linking executive compensation with
stockholder interests, the Corporation's performance relative to its objectives
and the Corporation's other accomplishments during the year.
Based on the foregoing, the Committee decided that a total of 560,917 stock
options would be awarded to all eligible employees (excluding the Chief
Executive Officer) with respect to performance in fiscal 1997 (215,000 stock
options of which were for executive officers of the Corporation, excluding its
Chief Executive Officer).
RESTRICTED SHARE AWARDS. In order to align the interests of its executive
officers with those of the Corporation's stockholders over the long-term, the
Committee has also made, and may in the future make, restricted stock awards to
executive officers at or above the vice president level in connection with their
recruitment. These restricted shares are subject to the Corporation's right to
repurchase for 90 days following termination of employment, at the original
purchase price (plus any interest accrued if the restricted shares were issued
in exchange for a note). These shares are released from this repurchase option,
assuming continued employment, 25% per year over a four year period following
the issuance of such shares. In 1997, the Corporation waived these repurchase
rights with respect to restricted shares issued to four vice presidents of the
Corporation hired in 1995 to provide relief from escalating tax withholding
liabilities. In addition, Drs. Savello and Vincek, Senior Vice President,
Development and Vice President, Corporate Quality, respectively, were each
granted restricted share awards, which vest as described above, for 10,000 and
5,000 shares, respectively, upon joining the Corporation in 1997.
CHIEF EXECUTIVE OFFICER COMPENSATION
In July 1993, Dr. Smith was recruited as the Corporation's first employee
and given the mandate to organize the Corporation's operations, secure
additional financing and recruit its initial staff. At that time, his salary was
set at $200,000 based on a review of the base salaries paid to other experienced
executives being recruited to early-stage biopharmaceutical companies. Based on
Dr. Smith's leadership of the Corporation to date, the Committee has since voted
to increase Dr. Smith's base annual salary each year. In light of his strong
performance in 1997, the Committee increased his base annual salary, effective
March 1, 1998, to $350,000, an increase of $50,000 over his base annual salary
of $300,000 set for 1997. The Committee also awarded him a cash bonus of
$150,000 for his performance in fiscal 1997, and granted him 80,000 stock
options with an exercise price of $19.75 (the fair market price of the stock on
the trading day preceding the grant), vesting 25% annually.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits tax deductions for
executive compensation to $1 million. There are several exemptions to Section
162(m), including one for qualified performance-based compensation. To be
qualified, performance-based compensation must meet various requirements,
including shareholder approval. The Committee believes that under the
Corporation's current compensation practices, the limitations of Section 162(m)
have no or minimal applicability currently and in the near future. While it is
generally desirable to maximize the deductibility of compensation, there may be
cases where it is in the best interest of the Corporation and its shareholders
to provide, and the Committee may from time to time in the future provide,
incentives to key employees which may exceed the deductibility limit under
Section 162(m).
CONCLUSION
In summary, the Committee believes that, through the arrangements described
above, a significant portion of the Corporation's compensation program and Dr.
Smith's compensation is contingent on the Corporation's performance, and that
realization of benefits is closely linked to increases in long-term stockholder
value. The Corporation remains committed to this philosophy of pay for
performance, recognizing
14
<PAGE> 17
that the competitive market for talented executives and the volatility of the
Corporation's business may result in highly variable compensation for a
particular time period. We will continue to monitor closely the effectiveness
and appropriateness of each of the components of compensation to reflect changes
in the Corporation's business environment.
COMPENSATION COMMITTEE
George L. Bunting, Jr., Chairman
Elizabeth M. Greetham
W. Leigh Thompson, M.D., Ph.D.
15
<PAGE> 18
STOCK PERFORMANCE CHART
The following graph sets forth the Corporation's Relative Stock Price
Performance compared to the NASDAQ Stock Market Composite Index and the
BioCentury 100 Index for the period beginning June 17, 1994 (the date on which
the Corporation's common stock began to trade publicly) and ending December 31,
1997. Total stockholder return assumed $100.00 invested at the beginning of the
period in the common stock of the Corporation at its initial public offering
price of $5.33 per share and in each of the aforementioned indices,
respectively; historical price performance should not be relied upon as
indicative of future stock performance.
GUILFORD PHARMACEUTICALS INC.
STOCK PERFORMANCE CHART
<TABLE>
<CAPTION>
NASDAQ
STOCK
MARKET GUILFORD
MEASUREMENT PERIOD COMPOSITE BIOCENTURY PHARMACEUTICALS
(FISCAL YEAR COVERED) INDEX 100 INDEX INC.
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6/17/94 100.00 100.00 100.00
12/31/94 103.10 90.46 65.63
12/31/95 144.26 163.06 198.44
12/31/96 177.01 180.03 435.94
12/31/97 215.31 174.12 377.34
</TABLE>
PROPOSAL 2
PROPOSAL TO AMEND THE CORPORATION'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED
The Board of Directors of the Corporation has approved, declares it
advisable and in the best interests of the Corporation and its stockholders, and
recommends that the first sentence of Article Fourth of the Corporation's
Amended and Restated Certificate of Incorporation, as amended, be amended to
increase the authorized shares of the Corporation's common stock from 40,000,000
shares to 75,000,000 shares. The text of the Amendment is as follows:
FOURTH: The total number of shares of all classes of stock the
Corporation shall have authority to issue is Eighty Million (80,000,000)
shares consisting of Seventy-Five Million (75,000,000) shares of common
stock, par value $.01 per share, and Five Million (5,000,000) shares of
preferred stock, par value $.01 per share.
As of April 1, 1998, there were shares of common stock
outstanding. In addition, as of April 1, 1998, options to purchase shares
were outstanding under the Corporation's employee share option and restricted
share plans, options to purchase 120,000 shares were outstanding under the
Director Plan, and options to purchase another 652,800 shares were outstanding
outside of these plans. In addition, as of April 1, 1998, an additional
1,012,934 shares of common stock of the Corporation are issuable upon exercise
of outstanding warrants. Thus, at April 1, 1998, the Corporation had outstanding
or reserved for issuance shares of common stock.
16
<PAGE> 19
The authorization of an additional 35,000,000 shares of common stock would
give the Board the express authority, without further action of the
Corporation's stockholders, to issue such shares of common stock from time to
time as the Board deems necessary or advisable. The Corporation expends
substantial funds on research and development and other commercialization
activities, including possible expansion and development of manufacturing
capacity, conduct of preclinical studies and clinical trials of product
candidates, and administrative support of these activities.
The Board believes that having the additional shares authorized and
available for issuance will allow the Corporation to have greater flexibility in
considering potential future actions involving the issuance of stock which may
be desirable or necessary to accommodate the Corporation's business plan,
including capital raising transactions. In addition, the Board believes it is
necessary to have the ability to issue such additional shares for general
corporate purposes. Such general corporate uses of the additional authorized
shares of common stock may include issuance of shares in connection with
corporate partnering transactions with other companies for the research,
development and/or commercialization of the Corporation's technologies,
acquisition transactions, stock dividends or distributions, stock splits and
distributions in connection with future issuance of preferred stock of the
Corporation, stock options or warrants, or in connection with exercise of rights
under the Corporation's Shareholders' Rights Plan. Such additional shares of
common stock would be available for issuance by the Board without future action
by the stockholders, unless such action were specifically required by applicable
law or rules of any stock exchange on which the Corporation's securities may be
traded.
Although the proposed increase in the authorized capital stock of the
Corporation could be construed as having anti-takeover effects, neither the
Board nor management of the Corporation views this proposal in that perspective.
Nevertheless, the Corporation could use the additional shares to frustrate
persons seeking to effect a takeover or otherwise gain control of the
Corporation by, for example, privately placing shares to purchasers who might
side with the Board in opposing a hostile takeover bid. The Corporation is not
aware of any such hostile takeover bid a this time. In addition, shares of
common stock may be issued in the event that the rights issued in connection
with the Corporation's Stockholders' Rights Plan are exercised. Shares of common
stock could also be issued to a holder that would thereafter have sufficient
voting power to assure that any proposal to amend or repeal the By-Laws of the
Corporation or certain provisions of the Corporation's Amended and Restated
Certificate of Incorporation, as amended, would not receive the requisite vote
required. Such uses of the common stock could render more difficult or
discourage an attempt to acquire control of the Corporation, if such
transactions were opposed by the Board. Further, an issuance of additional
shares by the Corporation could have the effect on the potential realizable
value of a stockholder's investment in the Corporation. In the absence of a
proportionate increase in the Corporation's earnings and book value, an increase
in the aggregate number of outstanding shares of common stock would dilute the
earnings per share and book value per share of all outstanding shares of the
Corporation's common stock. The foregoing factors, if reflected in the price per
share of common stock, could adversely affect the realizable value of a
stockholder's investment in the Corporation.
The affirmative vote of a majority of all shares of the Corporation's
common stock outstanding on the Record Date is required for approval of the
Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2 TO AMEND THE
CORPORATION'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED,
INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 40,000,000
SHARES TO 75,000,000 SHARES.
PROPOSAL 3
RATIFICATION OF INDEPENDENT PUBLIC AUDITORS
The independent public accounting firm of KPMG Peat Marwick LLP has acted
as the Corporation's independent auditors for the year ended December 31, 1997
and has been selected by the Board of Directors to act as such for the
examination of the Corporation's 1998 financial statements, subject to
ratification by the
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<PAGE> 20
stockholders. Representatives of KPMG Peat Marwick LLP are expected to be
present at the Annual Meeting and will have an opportunity to make a statement
if they desire and to respond to appropriate questions.
In the event the appointment of KPMG Peat Marwick LLP as independent public
auditors for 1998 is not approved by the stockholders, the adverse vote will be
considered as a direction to the Board of Directors to consider the selection of
other auditors for the following year. However, because of the difficulty in
making any substitution of auditors so long after the beginning of the current
year, it is contemplated that the appointment for the year 1998 will be
permitted to stand unless the Board finds other good reason for making a change.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3 RATIFYING THE
CORPORATION'S SELECTION OF KPMG PEAT MARWICK LLP AS THE CORPORATION'S
INDEPENDENT PUBLIC AUDITORS FOR THE 1998 FISCAL YEAR.
DATE OF SUBMISSION OF STOCKHOLDER PROPOSALS
TO BE INCLUDED IN PROXY MATERIALS
Any proposal or proposal intended to be presented by any stockholder at the
1999 Annual Meeting of Stockholders must be received by the Corporation by
December , 1998 to be considered for inclusion in the Corporation's proxy
statement and form of proxy relating to that meeting.
REVOCABILITY OF PROXY AND VOTING PROCEDURES
Shares can be voted only if the stockholder is present in person or by
proxy. Whether or not you plan to attend in person, you are encouraged to sign
and return the enclosed proxy card. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before its use
by delivering to the Secretary of the Corporation at the above address a written
notice of revocation or a duly executed proxy bearing a later date, or by
attending the meeting and voting in person. The representation in person or by
proxy of at least a majority of the outstanding shares entitled to vote is
necessary to provide a quorum at the meeting. Directors are elected by a
plurality of the affirmative votes cast. A majority of the votes cast
represented at the meeting is required for approval of each other proposal.
Abstentions and "non-votes" are counted as present in determining whether
the quorum requirement is satisfied. With respect to the election of Directors,
because Directors are elected by a plurality and abstentions and "non-votes" are
not treated as votes against, abstentions and non-votes will not affect the
outcome of the election. Abstentions and "non-votes" are treated as votes
against proposals presented to stockholders other than elections of Directors. A
"non-vote" occurs when a nominee holding shares for a beneficial owner votes on
one proposal, but does not vote on another proposal because the nominee does not
have discretionary voting power and has not received instructions from the
beneficial owner.
OTHER BUSINESS TO BE TRANSACTED
As of the date of this proxy statement, the Board of Directors knows of no
other business which may come before the Annual Meeting. If any other business
is properly brought before the Annual Meeting, it is
18
<PAGE> 21
the intention of the proxy holders to vote or act in accordance with their best
judgment with respect to such matters.
By Order of the Board of Directors
THOMAS C. SEOH
Vice President, General Counsel
and Secretary
Baltimore, Maryland
April , 1998
19
<PAGE> 22
GUILFORD PHARMACEUTICALS INC.
REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19, 1998
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of GUILFORD PHARMACEUTICALS INC. (the
"Corporation") hereby appoints Craig R. Smith, M.D., Andrew R. Jordan and
Thomas C. Seoh, or any of them, as attorneys and proxies of the undersigned,
with full power of substitution and with authority in each of them to act in
the absence of the other to vote and act for the undersigned at the Annual
Meeting of Stockholders of the Corporation to be held on Tuesday, May 19,
1998 at 10:00 a.m. (Eastern time) at the Corporation's headquarters located at
6611 Tributary Street, Baltimore, Maryland, and at any adjournments thereof, in
respect of all shares of the Common Stock of the Corporation which the
undersigned may be entitled to vote, on the following matters:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. HOWEVER, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR THE NOMINEES IN PROPOSAL 1 AND FOR PROPOSAL 2 TO AMEND THE
CORPORATION'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED,
INCREASING THE ATHORIZED NUMBER OF SHARES OF COMMON STOCK FROM 40,000,000 TO
75,000,000.
The undersigned hereby acknowledges prior receipt of a copy of the Notice of
Annual Meeting of Stockholders and proxy statement dated April __, 1998 and the
1997 Annual Report to Shareholders, and hereby revokes any proxy or proxies
heretofore given. This Proxy may be revoked at any time before it is voted by
delivering to the Secretary of the Corporation either a written revocation of
proxy or a duly executed proxy bearing a later date, or by appearing at the
Annual Meeting and voting in person.
(TO BE SIGNED ON REVERSE SIDE)
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A [X] Please mark your
votes as in this
example
<TABLE>
<S> <C>
FOR WITHHOLD AUTHORITY
all nominees to vote for the following
listed at right nominee(s):
1. Election of [ ] [ ] NOMINEES: Craig R. Smith, M.D.
directors to Richard L. Casey
the Board of Solomon H. Snyder, M.D.
Directors W. Leigh Thompson, M.D., Ph.D.
Elizabeth M. Greetham
For, except vote withheld from the following nominee(s): George L. Bunting, Jr.
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</TABLE>
FOR AGAINST ABSTAIN
2. Approval of an amendment to the [ ] [ ] [ ]
Corporation's Amended and Restated
Certificate of Incorporation, as amended,
increasing the authorized number of shares
of common stock from 40,000,000 to 75,000,000
3. Ratification of KPMG Peat Marwick LLP as [ ] [ ] [ ]
independent auditors for 1998.
4. In their discretion, on any other matters that may properly come before the
meeting, or any adjournment thereof, in accordance with the recommendations
of a majority of the Board of Directors.
If you receive more than one proxy card, please sign and return all cards in
the accompanying envelope.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. DELAY IN
RETURNING YOUR PROXY MAY SUBJECT THE CORPORATION TO ADDITIONAL EXPENSE.
DATED:
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SIGNATURE OF STOCKHOLDER OR AUTHORIZED REPRESENTATIVE
DATED:
- -------------------------------------------------------- -----------
SIGNATURE IF HELD JOINTLY
Note: Please date and sign exactly as name appears hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact and other fiduciary
should sign and indicate his or her full name. In the case of stock
ownership in the name of two or more persons both persons should sign.
